What is meant by 'Faithful Representation'?
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Information must be complete, neutral, and free from error.
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What is meant by 'Faithful Representation'?
Information must be complete, neutral, and free from error.
What defines a financial instrument?
Contracts that create a financial asset for one entity and a financial liability or equity instrument for another.
What are the types of financial instruments?
Debt Instruments (like bonds and loans) and Equity Instruments (like stocks and options).
What are the elements of financial statements?
Assets, Liabilities, Equity, Revenues, Expenses.
What is the role of the FASB?
The Financial Accounting Standards Board is the primary body responsible for establishing GAAP.
What does 'Relevance' mean in financial reporting?
Information must be capable of making a difference in decisions.
What is Historical Cost?
The original transaction value.
What factors influence subsequent measurement of financial instruments?
It depends on classification (amortized cost vs. fair value).
What are the challenges in financial measurement?
Subjectivity and estimation in determining fair values, and the impact of measurement on financial statements.
What are the disclosure requirements for financial instruments?
Information about risks, fair value measurements, and credit quality.
What are the qualitative characteristics of financial information?
Relevance and Faithful Representation.
What is Fair Value?
The current market value of an asset.
How is initial recognition of financial instruments determined?
At fair value.
What are the different measurement bases in financial reporting?
Historical Cost, Fair Value, Net Realizable Value, Present Value.
What are the key financial statements?
Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Shareholders' Equity.
What is the purpose of the conceptual framework for financial reporting?
To provide a foundation for accounting standards and to guide the development of future standards.
What does GAAP stand for?
Generally Accepted Accounting Principles, which are standards and guidelines for financial reporting.
Who are the primary users of financial information?
Investors, creditors, regulators, and management.
What is the primary objective of financial reporting?
To provide information that is useful for making investment and credit decisions.
